What’s next for shares of this retail stock?

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THE are many challenges for retailers. After the pandemic, it became clear that online stores and high street stores each have their own purpose. Having one or the other is not a solution for most retailers; ideally they need both. They must also be ready to innovate. From “retail-tainment” where the consumer “experience” is as important as the products sold, to livestream and social shopping where peers and consumer influencers are a key way to drive sales (or not). All of this is now made even trickier by the cost of living crisis and the inevitable consumer belt tightening that may dominate for some time.

Next has the required presence in online and physical stores. It has seven UK depots and two international hubs, which deliver to its online and retail customers. Operating from approximately 500 stores in the UK and Ireland and with approximately 199 stores in 35 countries, it has an extensive network and uses its stores to support its online customers; offering order collection and returns processing.

Next’s decision to add a mix of high street and designer brands to its own branded products was a smart move; especially in the age of brand awareness and influencers. And let’s not forget its Ocado-style e-commerce platform that it is successfully deploying. Its “total platform”, designed to manage the e-commerce side of other fashion brands’ businesses, has already been sold to Gap and Reiss.

It is involved in a joint venture with Gap, bought a 25% stake in high street fashion chain Reiss, in a deal worth around £200m and recently acquired 44% of the shares of baby clothing and maternity clothing retailer JoJo Maman Bébé.

Disappointing for investors, talks recently ended to acquire a stake in struggling fashion retailer Joules. Joules had confirmed in early August that he was in talks with Next, who were looking to take a 25% stake for £15million. Although the exact reason for the failure of the talks was not revealed, the consumer crisis was blamed. Joules’ share price fell after a profit warning last month.

However, despite talks ending, Joules said he was still in discussions with Next about using its Next Total Platform online services. He said he had “an ongoing positive relationship with Next” and would continue to sell through its Label online store.

Analysts are generally positive on Next shares. JP Morgan recently set a target price of £60 on the shares. They are currently trading around £58. Barclays last month raised its price target on the shares from £80 to £81 and gave the stock an “overweight” rating. More recently, Royal Bank of Canada reiterated its ‘outperform’ rating and set a price target of £72 on the shares, while Shore Capital reiterated its recommendation to ‘hold’ and JPMorgan cut its price target by 72. £.80 to £60 and set a ‘neutral’ price. ” note on the stock.

Next’s half-year results are expected on September 29.

Learn more about Next (NXT)

Five-year performance table Next

(%)
As of Sept. 21
2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
Next PLC Ord 10P 7.3 18.8 -0.1 36.2 -25.8

Past performance is not a reliable indicator of future returns

Source: FE from 21.9.17 to 21.9.22 Basis: Total returns in GBP. Excludes upfront costs.

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